School District got 20 offers on buildings listed for sale

University City High is one of seven schools listed for "expedited sales" - and among the most valuable. (JESSICA GRIFFIN / File Photograph)

By Troy Graham, Inquirer Staff Writer

Posted: January 09, 2014

The Philadelphia School District, attempting to fill part of its budget gap by selling off empty buildings, received 20 offers on properties after listing them for sale last fall on its website.

The district had been seeking offers on the entire portfolio of 28 shuttered schools, or individual bids for one of the seven schools listed for "expedited sales."

The deadline for submitting proposals was Dec. 17.

Fernando Gallard, a spokesman for the district, said he could not provide more specific information about the offers because negotiations were pending.

To cover what the city pledged toward the district's budget deficit, sales worth at least $61 million have to be completed by June 30. If not, the city would have to dip into its funds to make up the difference.

Mark McDonald, a spokesman for Mayor Nutter, said the initial interest in the buildings was encouraging.

"It's a little early to say anything definitive about . . . what the net could be to the School District," he said. "But the administration and the mayor are pleased with the significant response that has come in so far."

City Council President Darrell L. Clarke, who pushed for the sale of buildings, said he still had concerns about the district's process. He has said repeatedly that the district has done a poor job selling real estate and should turn the job over to experts.

He noted that 21 of the 28 buildings were not being offered for sale. For those, the district sought "expressions of interest" that were not formal offers and would not be "the opening of negotiations," according to the district website.

"The process that was laid out . . . by the School District," Clarke said, "was not consistent with the sense of urgency the district had this summer about the need for revenue."

In August, Superintendent William R. Hite said classes would not start on time unless the city pledged $50 million toward the district's $304 million deficit.

Schools eventually opened as scheduled, but Nutter and Clarke spent months haggling over the best way to provide the money.

Nutter wanted to follow the outlines of a state plan that called for the city to borrow the money against future collections of the city's extra 1 percent sales tax.

Clarke and his colleagues coalesced around the idea of giving the district the money in exchange for school buildings that could be sold to repay the city.

Among other objections, Nutter said he did not want the city to become responsible for the upkeep of another collection of large, aging buildings.

He and members of his administration also were skeptical that properties could be sold quickly enough to raise that much money.

They noted that the district tried to sell a dozen buildings in 2012, but received just nine offers worth $11.8 million.

In October, Nutter agreed to a compromise that hinged on selling at least $61 million worth of buildings by June 30 - covering the $50 million the city had pledged, as well as the $11 million the district already had budgeted in 2014 from selling off property.

The district would retain control of the properties, which would be sold with the help of the city's Commerce Department and the Philadelphia Industrial Development Corp.

If the district failed to sell enough buildings, the city would cover the difference from a $50 million pool of money Council authorized in the fall.

To spend that money, however, the city would have to follow the outlines of Clarke's plan and enter into an agreement to take control of empty schools to be sold through the Philadelphia Authority for Industrial Development.

Two of the schools listed for expedited sales - University City High School and Charles Drew Elementary - sit on the same plot near Drexel University and likely would be sold together. They constitute the district's most valuable available real estate.

Allan Domb, president of the Greater Philadelphia Association of Realtors, has predicted that University City and William Penn High School, on North Broad Street near Temple University, could generate more than $50 million combined.

But William Penn is not one of the schools offered for expedited sale. Gallard said William Penn did not meet the two factors necessary - "demonstrated significant interest and [being] available for quick disposition."

He said he could not elaborate.

The district received 18 expressions of interest on properties in the pool of 21 that included William Penn, he said.

It's also unclear whether any offers were made for the entire portfolio. In October, a Washington real estate investment firm, Municipal Acquisitions, made an unsolicited $100 million offer for all the shuttered buildings.

The firm's chief executive, Jon Kling, was on vacation last week and could not be reached, according to his office.

A Philadelphia-based firm that also made an unsolicited bid in the fall, Alterra Property Group, eventually decided against pursuing an offer.

The company's cofounder, Leo Addimando, said Alterra previously bought a building from the district after an 18-month process.

"For us to get involved in another process, it's a lot of effort," he said. "Things in our world need to move quickly."

BY THE NUMBERS

28

Number of vacant schools.

7

Schools listed

for "expedited sales."

$61M

Amount of money

the School District needs to raise by selling the buildings.

$50M

Amount city had pledged in expectation of building sales.

$11M

Amount the School District had budgeted for property sales beyond the $50 million pledge.